Hot chip stocks suffer a tough one-two punch, but there are winners in Tuesday’s down market
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Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: The S & P 500 on Tuesday was giving back roughly half of its gains from the prior session, which ended at record highs. Interest rate-sensitive sectors like real estate and utilities were outperforming amid a small dip in the 10-year Treasury yield . Financials extended their recent win streak thanks to another round of strong earnings reports. Energy led to the downside due to a roughly 5% sell-off in U.S. oil prices . Technology was a big drag, pulled down by weakness across the semiconductor industry. The health-care sector was soft as insurance stocks pulled back in reaction to a disappointing update from Dow stock UnitedHealth. Semiconductors : Nvidia and Advanced Micro Devices were already off to a lower start Tuesday after Bloomberg News reported the Biden administration was considering limiting sales of artificial intelligence chips to Persian Gulf countries. The selling pressure across the sector intensified after 10:30 a.m. ET when Dutch semiconductor capital equipment maker ASML released earnings earlier than expected. While the company beat Street estimates on sales, the real fear came from guidance. Third-quarter bookings fell 53% quarter over quarter to 2.63 billion euros, well below the 5.39 billion euro estimate — just a massive shortfall. In addition, management lowered its 2025 net sales forecast and cut its gross-margin outlook. ASML shares that trade in the U.S. sank 17%. At first glance, it could be argued that ASML’s weak bookings were due to a slowdown in AI spending. It goes without saying that investment in AI is a key part of so many different parts of the market. However, the company chalked up the lower numbers to a sluggish recovery in other markets. “While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected,” CEO Christophe Fourquet said in ASML’s earnings release. “This is expected to continue in 2025, which is leading to customer cautiousness.” We bought shares of Advanced Micro Devices Tuesday before ASML news broke. We’re also reiterating our 1 ratings on fellow Club names Broadcom and Nvidia, which closed Monday at a record high. The ASML bookings shouldn’t be taken lightly, and we will learn more about chip spending as we move through earnings season. Still, Micron recently reported a better-than-feared quarter with good guidance. Monthly sales trends at Taiwan Semiconductor Manufacturing Company — the largest chip manufacturer in the world – have also been promising. Luxury : LVMH shares that trade in the U.S. fell roughly 6% on Tuesday after the France-based luxury group reported a 3% decline in organic revenue for the third quarter. Analysts had been expecting a 1% increase. LVMH also saw sales misses in every segment: Fashion & Leather Goods, Wine & Spirits, Perfume & Cosmetics, and Watches & Jewelry. The Luis Vuitton company cited weakness in China as one reason for the disappointment and compared consumer confidence in the greater region to that of the all-time lows during the Covid pandemic. The CFO said it’s hard to assess the impact that Chinese stimulus will have in the whole region, but the measures show that authorities are addressing the slowdown. There is no direct readthrough from LVMH’s quarter into our portfolio anymore since we sold our position in Estee Lauder , which also declined sharply Tuesday. Up next: United Airlines , Interactive Brokers , and JB Hunt report earnings after Tuesday’s closing bell. Some of the big names reporting before Wednesday’s opening include Morgan Stanley and Abbott Laboratories . Morgan Stanley and Abbott are the lone Club holdings delivering financials this week. Wells Fargo put us on the board as the first portfolio company to report its third quarter on Friday. At noon ET on Wednesday, check out our October Monthly Meeting livestream, which can be accessed at the top of CNBC.com and on our Investing Club section front. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.
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